Soybean Prices Fall on Bearish USDA Report
?? Fundamentals
Soybean futures have moved into bear market territory for the first time since June, after the USDA raised U.S. Bean production estimates last week. In Friday’s crop production report, the USDA raised its estimate for 2012 Soybean production to 2.971 billion bushels vs. 2.860 billion bushels in the October report. The increase in production was tied to an increase in the average yield estimate of 39.3 bushels per acre. Ending stocks were increased by 10 million bushels to 140 million bushels, which added to the bearish tone.
Soybean prices have been supported by solid U.S. exports, especially to China. However, many analysts are beginning to question whether the torrid export pace can continue, especially with South America expected to produce a record Soybean crop this season. This may cause some buyers to wait to purchase “cheaper” South American Soybeans, which could cause U.S. Exports to slow. However, lower prices for domestic Soybeans may spur increased purchases by Soybean crushers, as Soybean Meal supplies are tight.
The recent sell-off in Soybeans has caused some large speculators to begin to lighten-up on their net-long positions, with the most recent Commitment of Traders report showing large non-commercial traders shedding over 6,000 contracts for the week ending November 6th. This was before the “bearish” USDA report, and now that prices have fallen below the 200-day moving average, it is likely that the pace of long-liquidation selling may accelerate.
?? Technical Notes
Looking at the daily chart for January Soybeans, we notice prices falling sharply once the USDA report was released. It appears that stop-loss selling was triggered once prices broke below the widely watched 200-day moving average once prices broke below 1450.00.
The 14-day RSI has moved into oversold territory, with a current reading of 26.00. We see some near-term support around the 1390.00 to 1392.00 price area for January Soybeans; major support is not found until the 1250.00 area. Resistance is seen at the October 15th low of 1484.00.
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